Boosted by strong business from back-to-school buyers, net
sales rose 9.6% year over year to $202.9 million and surpassed
the Zacks Consensus Estimate of $201.0 million. Moreover, we
believe that the company's sharp focus on expanding its store
network in mid-sized and smaller markets, as well as better
product mix are the major factors behind this growth.

Comparable store sales (comps) witnessed an increase of 6.4%,
marking the 12
th
consecutive quarterly increase for the retailer. Monthly comps
reflect an increase of 8.5% in August, 4.3% in September and 5.3%
in October. Hibbett experienced positive comps growth at all of
its categories.

Driven by improved product margin along with leveraged store
occupancy costs, Hibbett's gross profit for the quarter surged
11.2% to $75.4 million from $67.8 million in the year-ago
quarter. Consequently, gross margin expanded 60 basis points
(bps) to 37.2% during the quarter.

During the quarter, SG&A expenses, as a percentage of
revenue, declined 60 basis points year over year to 20.7% mainly
due to lower store labor expenses and favorable debit card
transaction fees. As a percentage of sales, depreciation and
amortization leverages 22 bps from last year, due to lower costs
for leasehold improvements for new stores.

A healthy gross margin, coupled with continued operational
momentum, drove a 21.3% increase in operating income during the
quarter. The company reported an operating income of $30.3
million compared with $25.0 million in the same period last year.
Consequently, operating margin for the reported quarter improved
145 bps to 14.9% from the prior-year quarter.

Financials

Hibbett ended third quarter fiscal 2013 with a strong balance
sheet, with $75.3 million in cash and cash equivalents, no
outstanding debt and $80 million available under its credit
facility.

During the quarter, the company bought back 206,729 shares for
a total cost of $11.8 million. Moreover, Hibbett on November 15
also announce a new share repurchase program worth of $250.0
million to be expired on January 29, 2016.

Stores Update

During the third quarter, the company expanded its store base
by opening 13 new stores and launching 4 high performing stores,
while it shuttered 2 underperforming stores. As a result, the
company's total store count at the quarter-end stood at 848 in 26
states.

Fiscal 2013 Outlook Raised

Buoyed by better-than-expected results, continued sales
strength along with improved cost management and margins, the
company raised its expectations for fiscal 2013. The company now
forecasts earnings in the range of $2.66-$2.71 per share, versus
the prior guidance of $2.57-$2.67 per share. Comparable store
sales for the year are expected to increase in the mid-single
digit range.

Further, the company still expects to expand its stores
network in fiscal 2013 by opening about 57 to 60 new stores.
Additionally, the company also plans to open nearly 17
high-performing stores and seal up to 18 stores during the
remainder of fiscal 2013.

Our Take

Hibbett remains focused on mid-sized and smaller markets with
population sizes of 25,000 to 75,000 and offers a strategic mix
of branded and localized merchandise. It serves a niche market by
strategically aligning its merchandise to regional/local sporting
and community interests. We believe this gives the company a
competitive edge over its peers, such as
Dick's Sporting Goods Inc.
(
DKS
) and
Big 5 Sporting Goods Corporation
(
BGFV
).

Further, Hibbett has a healthy debt-free balance sheet with
strong liquidity, comprising $80 million available under
its unsecured credit facilities. This offers Hibbett the
financial flexibility to open new stores and identify new markets
or locations for future expansion. Moreover, the company is
focusing on increasing its operating results while creating
shareholders' value.

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